Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2012
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to ________
Commission File Number: 333-173702
Excel Corporation
(Exact name of registrant as specified in its charter)
Delaware
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27-3955524
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(State or other jurisdiction of
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(I.R.S. Employer)
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incorporation or organization)
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Identification No.)
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595 Fifth Avenue, Suite 1101, New York, NY
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10022
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(Address of principal executive offices)
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(Zip Code)
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212-377-0100
(Registrant’s telephone number, including area code)
1384 Broadway, 17th Floor, New York, NY 10018
(Former name, former address and former fiscal year, if changed since last report)
___________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, accelerated filer, non-accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares common stock, $.0001 par value, outstanding as of November 21, 2012 was 31,573,745.
Excel Corporation
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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Consolidated Balance Sheet as of September 30, 2012 (unaudited) and December 31, 2011
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F-3
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Consolidated Statements of Operations for the three and nine months ending September 30, 2012 and 2011 (unaudited) and from inception on November 13, 2010 through September 30, 2012 (unaudited)
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F-4
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Consolidated Statement of Stockholders Equity for the nine months ended September 30, 2012 (unaudited)
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F-5
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Consolidated Statements of Cash Flows for the nine-month period ended September 30, 2012 and 2011 (unaudited) and from inception on November 13, 2010 through September 30, 2012 (unaudited)
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F-6
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Notes to Unaudited Consolidated Financial Statements
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F-7
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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2
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risks
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3
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Item 4.
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Controls and Procedures
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3
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PART II - OTHER INFORMATION
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Item 5.
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Other Information
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3 | |
Item 6.
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Exhibits
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4
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Signatures
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5
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Exhibit Index
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6
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Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For this purpose any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements. These statements involve unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include those risks identified in “Item 1A-Risk Factors” In Our Annual Report on Form 10K in the year ended December 31, 2011 as filed with the sec on April 11, 2012 and other reports filed with the Securities and Exchange Commission. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Readers are cautioned that actual results may differ from management’s expectations.
1
Excel Corporation and Subsidiary
(A Development Stage Company)
September 30, 2012
F-1
Explanatory Note: Excel Corporation (the “Company”) is filing this Quarterly Report on Form 10-Q (the “Form 10-Q”) pursuant to Securities and Exchange Commission Release No. 68224 dated November 14, 2012. The Company was unable to complete the Form 10-Q filing for the period ended September 30, 2012 due to the effects of Hurricane Sandy without unreasonable effort or expense. The Company’s personnel responsible for preparing its financial information, who are located in New York City, were unable to do so because of their inability to enter their offices and access electronic files for approximately 7 days. As a result of the impact of Hurricane Sandy, the Company and its personnel required additional time to complete its review of the financial statements for the quarterly period ended September 30, 2012 to be incorporated in the Form 10-Q.
F-2
Part 1. Financial Information
Item 1. Financial Statements
Excel Corporation
( A Development Stage Company)
Consolidated Balance Sheet
ASSETS
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September 30,
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|||||||
2012
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December 31,
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|||||||
(Unaudited)
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2011
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CURRENT ASSETS
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Cash and equivilents
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$ | 1,274,766 | $ | 473,058 | ||||
Note Receivable
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60,000 | - | ||||||
Accrued Interest Receivable
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602 | - | ||||||
Total Current Assets
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1,335,368 | 473,058 | ||||||
OTHER ASSETS
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||||||||
License Agreements
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200,000 | 200,000 | ||||||
Total assets
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1,535,368 | 673,058 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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LIABILITIES
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Accounts Payable
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12,637 | 38,883 | ||||||
Accrued Expenses
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93,929 | - | ||||||
Note Payable
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120,000 | 120,000 | ||||||
Corporate Taxes Payable
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149 | 2,900 | ||||||
226,715 | 161,783 | |||||||
STOCKHOLDERS EQUITY
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Preferred stock, $.0001 par value,10,000,000 shares
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authorized, none issued and outstanding
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- | - | ||||||
Common stock, $.0001 par value, 200,000,000 shares
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authorized $31,573,745 and 30,486,000 issued and outstanding at September 30, 2012 and December 31, 2011 respectively.
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3,158 | 3,049 | ||||||
Additional paid-in capital
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725,158 | 575,267 | ||||||
Deficit Accumulated during the development stage
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(223,763 | ) | (67,041 | ) | ||||
Total Stockholders' Equity
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504,553 | 511,275 | ||||||
Accumulated minority Interest
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804,100 | - | ||||||
Total Equity
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1,308,653 | 511,275 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 1,535,368 | $ | 673,058 |
See Notes to the unaudited consolidated financial statements.
F-3
Excel Corporation and Subsidiary
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(A Development Stage Company)
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Consolidated Statement of Operations
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(Unaudited)
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From Inception November 13, 2010 through September 30, 2012 | ||||||||||||||||||||
Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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2012
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2011
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2012
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2011
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REVENUES
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Revenues
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$ | - | $ | - | - | $ | - | - | ||||||||||||
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Less: Cost of Sales
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- | - | - | - | - | |||||||||||||||
Gross profit
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0 | 0 | 0 | 0 | 0 | |||||||||||||||
EXPENSES
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Filing Fees
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1,065 | 3,993 | 3,382 | 8,618 | 16,317 | |||||||||||||||
Edgar Filing Fees
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2,175 | 9,426 | ||||||||||||||||||
Advertising
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18,728 | 57,110 | 57,110 | |||||||||||||||||
Telephone
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117 | 1,104 | 1,104 | |||||||||||||||||
Outside Services
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67,486 | 167,034 | 167,034 | |||||||||||||||||
Transfer Agent Fees
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76 | 2,513 | 5,613 | |||||||||||||||||
Legal and Accounting
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19,877 | 160,965 | 201,610 | |||||||||||||||||
Automobile
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1,281 | 3,012 | 3,012 | |||||||||||||||||
Bank Charges
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49 | 213 | 238 | |||||||||||||||||
Miscellaneous
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1,499 | 1,624 | ||||||||||||||||||
Total Expenses
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108,679 | 3,993 | 399,007 | 8,618 | 463,088 | |||||||||||||||
Net Loss before Other Income and Income Taxes
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(108,679 | ) | (3,993 | ) | (399,007 | ) | (8,618 | ) | (463,088 | ) | ||||||||||
OTHER INCOME
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Gain on Sale of Note Receivable
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85,448 | 240,433 | 240,433 | |||||||||||||||||
Referal Fee Income
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1,250 | 1,250 | 1,250 | |||||||||||||||||
Interest Income
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602 | 602 | 602 | |||||||||||||||||
Total Other Income
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87,300 | - | 242,285 | - | 242,285 | |||||||||||||||
Net Income (Loss) before Income Taxes
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(21,379 | ) | (3,993 | ) | (156,722 | ) | (8,618 | ) | (220,803 | ) | ||||||||||
INCOME TAXES
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Current
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- | - | - | - | 2,960 | |||||||||||||||
Deferred
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- | - | - | - | - | |||||||||||||||
Total Income Taxes
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- | - | - | - | 2,960 | |||||||||||||||
Net Income (Loss)
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(21,379 | ) | $ | (3,993 | ) | (156,722 | ) | $ | (8,618 | ) | (223,763 | ) | ||||||||
(Loss) per Common Share
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(0.00068 | ) | $ | (0.00010 | ) | (0.00508 | ) | $ | (0.00030 | ) | (0.00709 | ) |
See Notes to the unaudited consolidated financial statements.
F-4
Excel Corporation and Subsidiary
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(A Development Stage Company)
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Consolidated Statement of Stockholders' Equity
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(Unaudited)
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Deficit Accumulated During the Development Statge | |||||||||||||||||||||||
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Additional
Paid-In
Capital
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Preferred Stock
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Common Stock
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Shares
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Amount
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Shares
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Amount
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Balance-December 31, 2011
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30,486,000 | $ | 3,049 | $ | 575,267 | $ | (67,041 | ) | ||||||||||||||||
Net Loss - January 1, 2012 to September 30, 2012
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(156,722 | ) | ||||||||||||||||||||||
1,087,744 Shares of Common Stock Issued @ .1379 per Share Par value .0001
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1,087,745 | 109 | 149,891 | |||||||||||||||||||||
Balance September 30, 2012
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31,573,745 | 3,158 | 725,158 | (223,763 | ) |
See Notes to the unaudited consolidated financial statements.
F-5
Excel Corporation
(a Development Statge Co.)
Consolidated Statement of Cash Flows
(Unaudited)
From Inception on November 13, 2010 through September 30, 2012 | ||||||||||||
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Nine Months Ended
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September 30, 2012
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September 30, 2011
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net Loss
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$ | (156,722 | ) | $ | (8,618 | ) | $ | (223,763 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities:
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Changes in operating assets and liabilities
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(Decrease) Increase in Taxes Payable
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(2,751 | ) | 149 | |||||||||
(Decrease) Increase in Accounts Payable
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(26,246 | ) | 12,637 | |||||||||
Increase in accrued expenses
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93,929 | 93,929 | ||||||||||
(Increase) in Note Receivable
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(60,000 | ) | (60,000 | ) | ||||||||
(Increase) in accrued Interest receivable
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(602 | ) | (602 | ) | ||||||||
(Increase) in Licenses
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(50,415 | ) | ||||||||||
Net Cash (Used) Operating activities
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(152,392 | ) | (59,033 | ) | (177,650 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
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Increase in Minority Interest
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804,100 | 804,100 | ||||||||||
Issuance of Common Stock
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109 | 150 | 3,158 | |||||||||
Increase in Additional Paid in Capital
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149,891 | 536,693 | 725,158 | |||||||||
Increase in Note Payable
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120,000 | |||||||||||
Net Cash Provided by financing activities
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954,100 | 536,843 | 1,652,416 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
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(Increase) in Licensing Agreements
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(200,000 | ) | ||||||||||
Net Cash (Used) by Investing Activities
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0 | 0 | (200,000 | ) | ||||||||
Net Increase (Decrease) in Cash & Cash Equivalents
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801,708 | 477,810 | 1,274,766 | |||||||||
Cash & Cash Equivalents - Beginning of Period
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473,058 | 40,722 | 0 | |||||||||
Cash & Cash Equivalents - End of Period
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$ | 1,274,766 | $ | 518,532 | $ | 1,274,766 | ||||||
SUPPLEMENTAL DISCLOSURES OF CASH
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FLOW INFORMATION
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Cash paid for:
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Taxes
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$ | 0 | $ | 0 | $ | 0 | ||||||
Interest
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$ | - | $ | - | $ | - | ||||||
SUPPLEMENTAL DISCLOSURE OF NONCASH
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INVESTING AND FINANCING ACTIVITIES
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For the period ending September 30,
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NONE
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NONE
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NONE
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See Notes to the unaudited consolidated financial statements.
F-6
Excel Corporation and Subsidiary
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
September 30, 2012
1.
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ORGANIZATION AND OPERATIONS
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Excel Corporation (the “Company”) was organized November 13, 2010 as a Delaware corporation. The Company owns 100% of the common stock of XL Fashions, Inc. (subsidiary). The Company is considered a development stage company as defined by FASB ASC 915-205-45-6. The Company is currently devoting substantially all of its efforts in acquiring, developing and licensing brands in a broad range of product categories. The Company also intends to acquire, develop and license select brands where the brand name can be leveraged into new categories. The Company’s objective is to develop a diversified portfolio of iconic consumer brands by issuing licenses and then organically growing the existing portfolio, licensing new brands and entering into joint ventures or other partnerships with the goal of leveraging the experience of management in the license of branded merchandise.
Based upon the experience of our management, we expect that our licenses will typically require our licensees to pay us royalties based upon net sales with guaranteed minimum royalties in the event that net sales do not reach specified targets. We further expect that any licenses we issue will require licensees to pay us certain minimum amounts for the advertising and marketing of the respective license brands.
2.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Date of Management’s Review of Subsequent Events
The Company has evaluated subsequent events through the filing date of this report and determined that there were no recognized or non-recognized subsequent events to report.
Basis of Consolidation
The accounting and reporting policies of the Company conform with U.S. generally accepted accounting principles (“GAAP”). The consolidated financial statements of the Company include the accounts of Excel Corporation and its subsidiary, XL Fashions, Inc. All intercompany accounts and transactions have been eliminated in consolidation.
Accounting Method
The Company’s financial statements are prepared on the accrual method of accounting.
Revenue Recognition
The Company’s revenue will consist of fees from licenses issued. Revenues will include royalties and brand fund contributions which will be based on a percent of sales and an initial license fee. Royalties, license fees and brand fund contributions will be recognized in the period earned.
F-7
Excel Corporation and Subsidiary
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
September 30, 2012
2.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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Cash and Cash Equivalents
For purposes of reporting the statement of cash flows, the Company includes all cash accounts, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less as cash and cash equivalents. The carrying amount of financial instruments included in cash and cash equivalents approximates fair value because of the short maturities for the instruments held.
Income Taxes
Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to tax net operating loss carryforwards.
The deferred tax assets and liabilities represent the future tax return consequences of these differences, which will either be taxable or deductible when assets and liabilities are recovered or settled, as well as operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established against deferred tax assets when in the judgment of management, it is more likely than not that such deferred tax assets will not become available. Because the judgment about the level of future taxable income is dependent to a great extent on matters that may, at least in part, be beyond the Company’s control, it is at least reasonably possible that management’s judgment about the need for a valuation allowance for deferred taxes could change in the near term.
Loss Per Share
Basic net loss per share is computed by dividing net loss available for common stock by the weighted average number of common shares outstanding during the period.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
F-8
Excel Corporation and Subsidiary
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
September 30, 2012
3.
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RECENT ACCOUNTING PRONOUNCEMENTS
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In September 2011, the FASB issued Accounting Standards Update No. 2011-08, Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment (ASU 2011-08), to simplify how entities test goodwill for impairment. ASU 2011-08 allows entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If a greater than 50 percent likelihood exists that the fair value is less than the carrying amount then a two-step impairment test as described in Topic 350 must be performed. The guidance provided by this update becomes effective for annual and interim impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.
4.
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FAIR VALUE MEASUREMENTS
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Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
ASC Topic No. 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as described below:
Level 1: Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly. Level 2 inputs include quoted prices for similar assets, quoted prices in markets that are not considered to be active, and observable inputs other than quoted prices such as interest rates.
Level 3: Level 3 inputs are unobservable inputs.
The following required disclosure of the estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The methods and assumptions used to estimate the fair values of each class of financial instruments are as follows:
Cash and Cash Equivalents, Accounts Payable, and Corporate Tax Payable
The items are generally short-term in nature, and accordingly, the carrying amounts reported in the consolidated statements of financial condition are reasonable approximations of their fair values.
F-9
Excel Corporation and Subsidiary
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
September 30, 2012
4.
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FAIR VALUE MEASUREMENT (Continued)
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Note Receivable
The carrying amount approximates the fair value.
License Agreements and Note Payable
The carrying amounts approximate the fair value.
5.
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INCOME TAXES
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The Company accounts for income taxes in accordance with FASB Accounting Standards Codification Topic 740-10 which requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carryforwards. At September 30, 2012, the Company has available unused operating loss carryforwards of approximately $67,000 which may be applied against future taxable income which expires in various years between 2025 and 2026.
The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part upon the tax laws in effect, the future earnings of the Company, and other future events, the effects of which cannot be determined because of the uncertainty surrounding the realization of the loss carryforwards. The Company has established a valuation allowance equal to the effect of the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards.
6.
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STOCKHOLDERS' EQUITY
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At September 30, 2012, the Company had 200,000,000 shares of common stock authorized par value $.0001 and 10,000,000 shares of preferred stock authorized par value $.0001.
7.
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STOCK OPTIONS
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Under the Company's stock option plan, the Company may grant incentive and non statutory options to employees, non employee members of the Board and consultants and other independent advisors who provide services to the Corporation. The maximum shares of common stock which may be issued over the term of the plan shall not exceed 4,000,000 shares. Awards under this plan are made by the Board of Directors or a committee of the Board. Options under the plan are to be issued at the market price of the stock on the day of the grant except to those issued to 10% or more stockholders which shall be issued at 110% of the fair market value on the day of the grant. Each option exercisable at such time or times, during such period and for such numbers of shares shall be determined by the Plan
F-10
Excel Corporation and Subsidiary
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
September 30, 2012
7.
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STOCK OPTIONS (Continued)
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Administrator. However, no option shall have a term in excess of 10 years from the date of the grant. As of September 30, 2012, no options have been issued.
8.
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LOSS PER SHARE
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Loss per share is based on the weighted average number of common shares. Dilutive loss per share was not presented as of September 30, 2012 because it would have had an anti-dilutive effect on earnings.
The following is a reconciliation of the numerators and denominators of the basic per share calculation for the nine months ended September 30, 2012 and for the period November 13, 2010 (date of inception) through September 30, 2012.
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Nine Months Ended
September 30, 2012
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November 13, 2010
(date of inception)
through
September 30, 2012
|
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Loss from continuing operations available to common stockholders
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(156,722 | ) | (223,763 | ) | ||||
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||||||||
Weighted average number of common shares outstanding used in earnings per share during the period
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(30,848,582 | ) | (31,573,745 | ) | ||||
Loss per common share
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(.00508 | ) | (.00709 | ) |
9.
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LICENSING AGREEMENTS
|
Stand up to Cancer Agreement
On September 2, 2011, Excel Corporation, the “Licensee”, entered into a License Agreement with the Entertainment Industry Foundation, the “Licensor”, in which the Licensor granted the Licensee the exclusive right to manufacture, advertise, and distribute licensed products in a Territory as defined in the License Agreement. The term of the License Agreement commences on the effective date “September 2, 2011 and expires on December 31, 2014.
F-11
Excel Corporation
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
September 30, 2012
9.
|
LICENSING AGREEMENTS (Continued)
|
The Agreement calls for the Licensee to pay the Licensor royalties based on six percent (6%) of net sales as defined in the Agreement. The Licensee was required and paid a “Guaranteed Minimum Royalty and Advance” of $50,000 upon execution of the agreement (September 2, 2011). Another $50,000 advance is due August 1, 2012. These Royalty deposits will be applied against royalties to be paid to the Licensor.
Provided that the Licensee is not in default of the Agreement, an additional two year renewal option is available with the same term and conditions which calls for an additional Guaranteed Minimum Royalty amount of $250,000 to be paid during the first year of the renewal term ending December 31, 2015.
Master License Agreement (Michael Vick)
On June 9, 2011, Excel Corporation “the Licensee” entered into a Master License Agreement with Michael Vick, “the Licensor”, which grants the Licensee an exclusive twenty-five year license to use the name and mark, referred to as the “Marks” pursuant to the “Master License” throughout the world. The license granted under the agreement is royalty free, provided that the Licensor is reimbursed for funds expended in registering, securing, acquiring, maintaining, or protecting the Mark.
In addition, the Licensor retains the absolute right to approve the design, content, packaging, and all other product characteristics utilized in the licensed Mark.
Sales Agreement (Billy Martin)
On October 21, 2011, Excel Corporation entered into an Agreement of Sale with Real American Capital Corp to purchase the assets of the business known as “Billy Martin’s”, collectively the “Assets”. The assets include the following:
1.
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All rights, title and interest in and under the trademarks including all claims associated with the license, the “Trademarks”.
|
2.
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The right, title and interest of the Seller in the name of Billy Martin’s, the “Name”.
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3.
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Any goodwill associated with the trademark, the “Goodwill”.
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4.
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Any furniture, furnishings, fixtures, “fixtures and equipment”, as defined in the agreement.
|
The purchase price for the assets above is $150,000 due as follows:
1.
|
$30,000 due at closing, October 24, 2011. – (Paid)
|
2.
|
An additional $120,000 at closing (October 24, 2011) by the execution of a Promissory Note by the Purchaser to the seller. This note calls for $30,000 payments at zero percent interest (0%) commencing October 17, 2012, and continuing on the 17th of October of each succeeding year, until Note is paid.
|
F-12
Excel Corporation
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
September 30, 2012
9.
|
LICENSING AGREEMENTS (Continued)
|
Representation Agreement (Soupman Inc.)
On February 4, 2012, Excel Corporation entered into an Agreement with Soupman, Inc. (Principal). Pursuant to the agreement, the Principal has designated Excel as the exclusive licensing agent in the Territory, as defined in the Agreement. As licensing agent, Excel Corp will negotiate and service licensing agreements on behalf of the Principal.
As compensation, Excel will receive 25% of all licensing revenue from agreements executed pursuant to the terms of the Representation Agreement and five percent (5%) of other licensing revenue as defined in the Agreement. All payments from License Agreements are made payable to the Principal and after such payment, the Agent (Excel Corp) will be paid the commission as indicated above.
The initial term of the Agreement is for one year and automatically renews provided that the Agent has submitted to the Principal a minimum of five potential license applications. Subsequent to the second year, the Agreement will terminate unless extended by written agreement.
Licensing Agreement (Camuto Consulting)
On February 21, 2012, Excel Corporation entered into an Agreement with Camuto Consulting, Inc. (the “Company”), in which the Company engaged Excel Corp as the Licensing Agent to identify and secure licenses as applicable. The Agreement is for a one year term and expires February 28, 2013.
Compensation to the Licensing Agent pursuant to the agreement is as follows:
1)
|
Commissions payable at six and a half (6.5%) on Royalties earned and received by the Company during the first term of solicited agreements with eligible Licensees that are executed.
|
2)
|
Commissions payable at five (5%) on Royalties earned and received by the Company during any renewal term of solicited agreements with eligible Licensees that are executed.
|
Licensing Agreement (Benedetto Arts, LLC)
On May 3, 2012 Excel Corporation entered into an Agreement with Bendetto Arts, LLC (“BA”), in which BA will utilize Excel Corp as an independent contractor for the solicitation of licensing opportunities. As compensation for its services, Excel will receive a commission based on 20% of Gross Revenue as defined in the Agreement.
The term of the Agreement is for one year commencing on May 3, 2012 with an option to extend if both parties agree. In addition, if Excel Corp does not deliver three business opportunities from the May 3, 2012 date, BA has the right to terminate the Agreement.
F-13
Excel Corporation
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
September 30, 2012
9. LICENSING AGREEMENTS (Continued)
Representation Agreement-Life Guard
On January 2, 2012, Excel Corporation entered into an Agreement with Lifeguard Licensing Corp, (“the Principal) in which the Principal owns rights to trademarks, packaging, designs, images, copyrights and other intellectual property referred to as the “ Property”. The Principal, pursuant to the Agreement designated Excel Corp as the Licensing Agent to negotiate and service license agreements with respect to commercial exploitation of the Property within the Territory as defined in the Agreement.
The term of the Agreement is for one year commencing on the effective date (January 2, 2012). The Principal may terminate the Agreement upon written notice if the agent does not meet certain terms as defined in the agreement. The Agents compensation will be calculated at 25%,20% and 15% of Net Revenues for the initial term, second renewal term, and third renewal term respectively. In addition to the Agent’s Compensation the Principal will reimburse the Agent for out of pocket expenses.
Representation Agreement-Hickory Farms
On March 12, 2012, Excel Corporation entered into an Agreement with Hickory Farms, Inc. (“the Principal) in which the Principal owns rights to trademarks, packaging, designs, images, copyrights and other intellectual property referred to as the “ Property”. The Principal, has designated Excel Corp as the Licensing Agent to negotiate and service license agreements only, with respect to commercial exploitation of the Property within the Territory as defined in the Agreement. This excludes any wholesale sales of Hickory Farm product of which the Agent will not receive any commissions.
The term of the Agreement is for one year commencing on the effective date (March 12, 2012). The Principal may terminate the Agreement upon written notice if the agent does not meet certain terms as defined in the agreement. The Agents compensation will be calculated at 25%, 15% and 10% of Net Revenues for the initial term, first renewal term, and second renewal term respectively. In addition to the Agent’s Compensation the Principal will reimburse the Agent for out of pocket expenses.
10. LOAN ASSIGNMENT AGREEMENT
On June 25, 2012 the Company (XL Fashions Inc.) entered into a Loan Assignment Agreement with Seacoast Holdings (Efashion Inc.) Pursuant to the Agreement Seacoast Holdings will acquire the Loan, Warrant and related rights from XL Fashions Inc. for $925,000 which the Company originally acquired from Orix pursuant to an Assignment Agreement dated January 23, 2012.
The purchase price paid by E Fashions for the Loan, Warrant and related rights on June 27, 2012 was $925,000.
F-14
Excel Corporation
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
September 30, 2012
11. MINORITY INTEREST
Minority interest consists of the stockholders who hold the preferred stock of XL Fashions, Inc.
12. NOTE RECEIVABLE
On August 1, 2012 Excel Corporation entered into a Secured Promissory Note with Shoutomatic LLC (the Maker) in which the “Maker” promises to pay Excel Corporation( the Payee) the principal sum of $60,000 at an interest rate of Six percent per annum. The interest will accrue and be paid on the August 1, 2013 (Maturity date). The maker will have the right to prepay without a penalty.
F-15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This management's discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. You should read the following discussion and analysis in conjuction with our consolidated financial statements and related notes included elsewhere in this Report. Our actual results may differ materially from those discussed in the forward looking statements as a result of various factors, including but not limited to those described elsewhere in this Report and listed under "Item 1A-Risk Factors in our Annual Report on Form 10K for the year ended December 31, 2011, as filed with the SEC on April 11, 2012, and other reports filed with the Securities and Exchange Commission. Except for historical information, the following discussion contains forward- looking statements with the meaning of the Private Securities Litigation Act of 1995 See "Cautionary Notice Regarding Forward Looking Statements" above.
Current Overview
We have been in a developmental phase since inception and had no revenues from operations for the period from inception, November 13, 2010 through June 30, 2012.
On May 3, 2012, we entered into an Agreement with Bendetto Arts, LLC (“BA”), in which BA will utilize us as an independent contractor for the solicitation of licensing opportunities. As compensation for its services, we will receive a commission based on 20% of gross revenue. The term of the agreement is for one year with an option to extend if both parties agree.
On June 25, 2012, our subsidiary XL Fashions, Inc. entered into a Loan Assignment Agreement with Seacoast Holdings (e-Fashion Inc.). Pursuant to the agreement, Seacoast Holdings acquired the Loan, Warrant and related rights from XL Fashions, Inc. for $925,000 which was originally acquired pursuant to an Assignment Agreement dated January 23, 2012. The purchase price paid by e-Fashions for the Loan, Warrant and related rights on June 27, 2012 was $925,000.
Results of Operations for the three and nine month periods ending September 30, 2012 and 2011
During the three months ended September 30, 2012, we had net loss of $21,379 based on the loan assignment described above compared to a net loss of $3,993 for the three months ended September 30, 2011.
During the three months ended September 30, 2012, we had general and administrative expenses of $108,679 compared to $3,993 for the three months ended September 30, 2011. Expenses for the three month period ended September 30, 2012 consisted of; Advertising $18,728; Filing fees $1,065; Legal and accounting fees $19,877; Outside Services $67,486; Telephone $117; Transfer Agent fees $76; Automobile $1,281 and Bank Charges $49.
During the nine months ended September 30, 2012, we had net loss of $156,722 compared to a net loss of $8,618 for the nine months ended September 30, 2011.
During the nine months ended September 30, 2012, we had general and administrative expenses of $399,007 compared to $8,618 for the nine months ended September 30, 2011. Expenses for the nine month period ended September 30, 2012 consisted of; Advertising $57,110; Filing fees $3,382; Edgar filing fees $2,175; Legal and accounting fees $160,965; Outside Services $167,034; Telephone $1,104; Transfer Agent fees $2,513; Automobile $3,012; Bank Charges $213 and Miscellaneous $1,499.
Liquidity and Capital Resources
On September 30, 2012, we had positive working capital of $1,108,653. While we expect that this may be sufficient to operate our business through the end of 2012, there can be no assurance that we will not need additional capital for operations. If we require additional capital, we may attempt to raise additional funds through sales of common stock or borrowings, but there are no assurances that we will raise sufficient amounts to meet our current needs.
Apart from our commitments related to our contracts, we have ongoing commitments for normal business expenses, including salaries, benefits and the like, and have made no other long term financial commitments pending receipt of additional funding. Should we not receive any additional funds; our priorities will be to exploit our current licenses.
2
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP.
Our critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Financial Statements. We have consistently applied these policies in all material respects. We do not believe that our operations to date have involved uncertainty of accounting treatment, subjective judgment, or estimates, to any significant degree.
Off-Balance Sheet Financing Arrangements
We do not have any off-balance sheet financing arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
We do not consider the effects of interest rate movements to be a material risk to our financial condition. We do not hold any derivative instruments and do not engage in any hedging activities.
Item 4. Controls and Procedures
Based on management’s evaluation (with the participation of our Chief Executive Officer (CEO) and Chief Accounting Officer), as of the end of the period covered by this report, our CEO and Chief Accounting Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 5. Other Information
In September 2012 our XL Fashions, Inc. (“XLF”) subsidiary redeemed a total of 2,689,629.1 shares of its preferred stock (the Preferred Stock”) from 4 XLF shareholders for aggregate consideration of $370,900. In addition, in September we allowed 4 XLF shareholders to convert an aggregate of 1,087,745 shares of XLF Preferred Stock into 1,087,745 shares of our common stock. The conversion of the shares of Preferred Stock to shares of our common stock was effected on a one for one basis. The Preferred Stock was by its terms convertible. After giving effect to the transaction above, there remains 5,831,037.9 share of preferred stock in XLFashions issued and outstanding.
On July 12, 2012, we entered into a Representation Agreement (the “Agreement”) with Hickory Farms, Inc. (“Hickory”) Pursuant to the Agreement, Hickory appointed us a licensing agent for its trademarks, packaging, designs, images, copyrights and other intellectual property. The Agreement is for a period of one year, however, Hickory shall have the right to terminate the Agreement, if upon the six month anniversary of the effective date we have not submitted two memorandum of understandings from prospective licensees to Hickory for review and approval. In consideration for our services we will be compensated based on the following commission structure; (a) 25% of net revenues received by Hickory during the initial term of any executed licensing agreements; (b) 15% of net revenues received by Hickory during the first renwal term, if any, of any such executed license agreements from the effective date of each such licensing agreement; and (c) 10% of net revenues received by Hickory during the second renewal term, if any, of any such executed license agreement from the effective date of each such license agreement.
3
Item 6. Exhibits
10.1
|
Share Redemption Agreement between XLFashions, Inc. and Marvin Azrak
|
|
10.2
|
Share Redemption Agreement between XLFashions, Inc. and Robert Choueke
|
|
10.3
|
Share Redemption Agreement between XLFashions, Inc. and David Zeitouni
|
|
10.4
|
Share Redemption Agreement between XLFashions, Inc. and Gabe Zeitouni
|
|
10.5
|
Share Exchange Agreement among Excel Corporation, XLFashions, Inc. and the shareholders of XLFashions, Inc.
|
|
10.6
|
Representation Agreement between Excel Corporation and Hickory Farms, Inc.
|
|
31.1
|
Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed by Ruben Azrak, Chief Executive Officer and Principal Accounting Officer of Excel Corporation.
|
|
32.1
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Ruben Azrak, Chief Executive Officer and Principal Accounting Officer of Excel Corporation.
|
|
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 26, 2012
|
EXCEL CORPORATION
|
||
(Registrant)
|
|||
By:
|
/s/ Ruben Azrak
|
||
Ruben Azrak
|
|||
Chief Executive Officer
(Principal Executive Officer)
|
|||
By:
|
/s/ Ruben Azrak
|
||
Ruben Azrak
|
|||
Principal Accounting Officer
|
5
Exhibit Index
Exhibit
Number
|
Description | |
31.1
|
Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed by Ruben Azrak, Chief Executive Officer and Principal Accounting Officer of Excel Corporation.
|
|
32.1
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Ruben Azrak, Chief Executive Officer and Principal Accounting Officer of Excel Corporation.
|
|
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
6